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Yen at 8-Week High

Daily Analysis - 09/08/2017

Safe Haven Buying Lifts Currency

The yen rallied to an eight week high against the U.S. dollar as investors flocked to the relative safety of the Japanese currency amid the latest flare up in geo-political tensions from the Korean peninsula. The U.S. dollar tumbled to the upper 109.0000 yen range in early Wednesday trade.

Investors Wake Up to North Korean Threat

The yen rallied following U.S. President Donald Trump's overnight warning to North Korea that any threat would be met with "fire and fury." Trump was reacting to a Washington Post report that said the “rogue” communist regime had successfully developed a miniaturized nuclear warhead that could fit inside missiles.

Following Trump's warning, North Korea responded early Wednesday by saying it was contemplating launching a missile strike against the U.S. Pacific territory of Guam.

USDJPY plunged below the key psychological level of 110.00000 in Wednesday morning trade. The pair rebounded amidst a bout of profit-booking to last trade around 110.0500. 110.20000 represents the immediate upside resistance, from where a fresh wave of selling could emerge.

Depending on how North Korea reacts, USDJPY could be headed lower.

Chinese Consumer Inflation Slows

Consumer inflation in China unexpectedly slowed in July amid cheaper food prices, official data showed Wednesday. The consumer price index edged 1.40% higher in July from a year ago. Analysts surveyed by Reuters had forecast consumer inflation to remain unchanged from June at 1.50% on year.

Food prices fell 1.10% from a year ago, compared with a 1.20% dip in June. Non-food prices rose 2.00%, versus a 2.20% increase in June.

On a monthly basis, the CPI gained 0.10% in July. Beijing hopes to keep consumer inflation under 3.00% this year.

Meanwhile, data from the National Bureau of Statistics showed Chinese producer price index rising 5.50% in July from a year earlier. Analysts were expecting producer prices to remain flat from the 5.50% on-year gain in June.

AUDJPY, which is prone to fluctuations in Chinese economic data, is off the lows of the session to last trade around the 86.55000-mark.

Optimism Among U.S. Small Businesses Rise

A widely-followed gauge of small-business confidence in the United States rose in July, buoyed by stronger hiring and an improved economic outlook.

The National Federation of Independent Business’ Index of Small Business Optimism rose to 105.2 last month from 103.6 in June. The pick-up was the index's first since January, and easily topped the consensus forecast for a decline to 103.2.

Small business owners signaled optimism in their ability to expand their operations largely due to an uptick in consumer spending. It follows robust official jobs data released on Friday.

However, the survey showed business owners had little enthusiasm for increasing their capital expenditures, as they wait for greater policy clarity from Washington.

Dow Jones Industrial Average September futures were last trading around 22020.

German Trade, Current Account Surplus Grows

Imports from Germany fell sharply in June, outpacing a dip in exports and widening Europe's biggest economy’s trade surplus figure. The Federal Statistical Office said Tuesday exports dropped 2.80% in June over the previous month, while imports sank 4.50%.

The seasonally adjusted trade surplus widened to a ten month high of 21.20 billion euros ($25.00 billion) from May's 20.30 billion euros. Analysts had projected a 0.30% drop in exports and a 0.20% rise in imports.

June trade surplus was anticipated to come in at 21.40 billion euros. The broader current account surplus, which tracks the flow of goods, services and investments, grew to 23.60 billion euros in June following a downwardly revised 16.00 billion euros in May. Economists polled had expected this surplus to be around 24.20 billion.

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